A Controlled Insurance Program (CIP) or Wrap-Up is an effective way to improve the safety and reduce insurance costs of large, multiple-contractor, construction projects. With a wrap-up, a single sponsor (either an owner or construction manager/general contractor) purchases insurance to cover the owner, construction manager and every contractor and subcontractor working on a project. Professional liability insurance and other coverages for engineers, architects and consultants is generally excluded. As is asbestos abatement, hazardous materials remediation and demolition. These activities are considered high risk and are often associated with long term exposures.
A wrap-up offers a structured way to consolidate risk, translating into significant cost savings. The Return On Investment (ROI) comes from efficiencies created through simplified program administration, reduction of overlapping coverage, improved safety and claim management and streamlined operations from a single-point-of-contact. Additionally, a wrap-up offers the opportunity to Disadvantaged Business Enterprises by removing the standard insurance requirements which may not otherwise be attainable from smaller contractors.
The average insurance cost on projects with individual contractor's providing their own coverage is between 3 to 4 percent of hard dollar construction costs. With a wrap-up, that average is closer to 2.5 percent. So, whether your construction costs are $100 million or $2 billion, you should see significant savings.
In many cases, the General Contractor or Construction Manager will finance the insurance for a project. These are referred to as Contractor Controlled Insurance Programs (CCIPs). Although the concept is similar to a wrap-up, this paper discusses only the aspects of OCIPs.